Survey: Employer health costs up 5 percent for 2017 in Michigan

Midsized employer average health care costs are projected to increase by 5 percent in 2017 after benefit plan changes, a slight uptick from last year's 4 percent expected rate and higher than the projected national rate of 4.1 percent, according to Troy-based Marsh & McLennan Agency LLC in a new report.

"The health care cost trend in general is going up with higher unit costs," said Becky McLaughlan, vice president with Marsh & McLennan. "Specialty drugs are becoming a greater and greater share of the costs."

For example, drug costs are projected to rise to 17 percent of total health care costs this year, compared with 14 percent in 2007, a 21 percent increase, according to data from Pricewaterhouse.

The next fastest-growing cost category is outpatient services, which are projected to rise to 19 percent of total costs this year from 16 percent in 2007, a 19 percent increase, said Pricewaterhouse.

"Pharmacy is approaching inpatient hospital costs," McLaughlan said.

Overall, specialty drugs now account for 38 percent of total pharmacy spending, up from 19.4 percent in 2012, said Christopher Bouschet, managing director and survey leader. That data comes from Blue Cross Blue Shield of Michigan, which accounts for about 75 percent of the preferred provider organization market in the state.

"With a steady pipeline of new specialty medications entering the market every year, the rising cost and distribution of specialty medications is a major concern and focus for employers," Bouschet said.

As a result, more employers are increasing copayments for specialty medications and non-formulary branded drugs. For example, employers increased non-formulary brand copayment to $80 from $75 for PPO plans. Formulary brand drugs' copays remain at $40 and generic copays are $10.

"Employers are being more aggressive on non-formulary brands to change behavior (of employees)" to encourage them to shift to generic drugs, McLaughlan said.

Employers also are continuing to shift about half of rising costs to employees. Contributions by employees rose 2.2 percent to $139 per month for single PPO coverage and 2 percent to $457 per month for family PPO coverage.

But employees with HMO plans saw their contributions increase 11.5 percent to $107 per month for single coverage and 9.9 percent to $365 per month for family coverage, Marsh said.

High-deductible employee contributions also rose 8.6 percent to $88 for single coverage and 5 percent to $294 for family high-deductible coverage.

"There is a lot of concern about controlling costs without shifting (too much) costs to employees," McLaughlan said.

Overall, before plan changes, health care costs are expected to rise 6.3 percent this year, far ahead of general inflation of about 1.5 percent, Marsh said, but still lower than 9.1 percent in 2010, 8.2 percent in 2012 and 8 percent in 2014.

Nationally, Mercer said employers have projected they would hold cost growth to about 4 percent in 2017, the same approximate rate as in 2011. For seven years before the Patient Protection and Affordable Care Act of 2010, employers' health care cost increases averaged about 6 percent annually, Mercer said.

Trend benders

Of the 388 participating employers in the Marsh survey, 101 are considered Trendbenders because they are most effective at reducing health benefit costs. Trendbenders represent the top 25 percentile of companies over the two years.

OHM Advisors, a Livonia-based architecture, planning and civil engineering firm with 400 employees, is one of Marsh's 101 Trendbender companies. It has steadily seen benefit plan reductions as it has implemented various cost management strategies.

Kelly Jackson, its human resource director, said OHM has lowered health care costs by engaging its employees with wellness and telemedicine programs and encourage generic drug use by lowering copayments.

And by adding a consumer-driven health plan with company contributions to health savings accounts, Jackson said the company expects to hold down average annual health costs this year to a projected 2.89 percent. OHM operates a self-funded health plan managed by Blue Cross Blue Shield of Michigan.

"We contribute $750 for a single health savings account and $1,500 for a family" per year, Jackson said. OHM's high-deductible plan has a $2,000 deductible for singles and $4,000 for two-person or families, she said. OHM also offers a slightly higher-cost PPO plan for people with health conditions.

Jackson said OHM, which considers itself to be a community advancement firm because it takes a holistic view of its workforce, also tries to educate its employees to be better consumers of health care to avoid cost emergency care and make best choices on medical procedures.

"We started a wellness program two years ago and engaged our employees by offering incentives to participate," said Jackson, noting that OHM has 100 percent participation with the program.

To receive an annual discount on employee health benefit premium contributions, employees must earn 400 wellness points by participating in such activities as getting their blood pressure, glucose and weight checked. Employees also can get a $75 reimbursement toward an approved wellness purchase, including gym membership, running shoes or active wear.

"We want to encourage people to go to the doctor," Jackson said. "Next year we will offer physicals. We believe if you have chronic condition and not treated, you can have a catastrophic problem. If your blood pressure is up, the silent killer, you could have heart attack. We don't want that."

OHM also has decreased copayments to $10 each for generic drugs to encourage more use. "We have been able to reduce pharmacy costs," she said.

Key trends in 2017

The number of employers that offer high-deductible health plans increased to 52 percent from 47 percent in 2016. In 2013, only 35 percent of employers offered high-deductible plans. Nationally, 61 percent of employers offer at least one high-deductible plan, according to Mercer.

"High-deductible plans are an effective mechanism to control costs," Bouschet said.

High-deductible health plans are a popular choice by employees because they typically are less expensive than other plans and can feature a tax-free health savings account or health reimbursement account with employer contributions.

Employers are also increasing in-network deductibles to lower costs and encourage employees to shop around. For example, PPO family plans increased deductibles to $1,500 in 2017 from $1,200 the year before. Single PPO deductibles remained the same at $600. HMO deductibles remained the same at $1,000 for single coverage and $2,000 for family.

Wellness programs, now sometimes called well-being programs, also continue to be popular with employers as a job productivity and cost reduction tool. This year, 80 percent of employers said they have a well-being initiative compared with 78 percent in 2016.

Another major trend was the number of employers offering telemedicine services increased to 66 percent this year from 38 percent in 2016 and only 4 percent in 2014. Nationally, telemedicine is also growing, 60 percent in 2016 from 30 percent in 2015, said Mercer. National data for 2017 was unavailable.